The trend estimate of the balance on current account for the September quarter 2008 was a deficit of $10,258m. This was a decrease of $986m (9%) on the deficit recorded for the June quarter 2008 where:

the goods and services surplus rose $553m (59%) to $1,498m

the income deficit fell $430m (4%) to $11,661m

the current transfers deficit fell $2m (2%) to $95m.

In seasonally adjusted terms, the current account deficit fell $4,307m (31%) to $9,736m between the June quarter 2008 and September quarter 2008 where:

the goods and services turnaround of $2,696m resulted in a surplus of $1,432m

the income deficit fell $1,610m (13%) to $11,072m

the current transfers deficit fell $1m (1%) to $96m.

Goods and Services

The trend estimate of the balance on goods and services at current prices was a surplus of $1,498m, an increase of $553m (59%) on the June quarter 2008 surplus.

In seasonally adjusted terms, the balance on goods and services was a surplus of $1,432m, a turnaround of $2,696m on the June quarter 2008 deficit where:

the net goods turnaround of $2,765m resulted in a surplus of $1,056m

the net services surplus fell $69m (16%) to $376m.

The turnaround in the goods surplus resulted from the increase in goods credits (exports), up $6,453m (12%) outweighing the increase in goods debits (imports), up $3,688m (7%).

Contributing to the increase in goods credits were:

non-rural goods, up $5,819m (14%)

other goods, up $1,034m (29%).

Contributing to the increase in goods debits were:

intermediate and other merchandise goods, up $2,252m (9%)

capital goods, up $926m (8%).

The decrease in the services surplus resulted from the increase in services debits, up $461m (3%) outweighing the increase in services credits, up $392m (3%).

In seasonally adjusted volume terms, the deficit on goods and services was $10,826m, an increase of $1,088m on the $9,738m deficit recorded in the June quarter 2008. The net deficit on goods rose $1,445m to $10,485m. Goods credits fell $209m and goods debits rose $1,236m (2%). The net services balance was a deficit of $341m, a decrease of $357m (51%) on the deficit of $698m in June quarter 2008.

The increase of $1,088m in the deficit on goods and services in volume terms is expected to detract 0.4 percentage points from growth in the September quarter 2008 volume measures of GDP, assuming no significant revision to the GDP chain volume estimate for the June quarter 2008.

Goods and Services(a)

Goods Credits

The trend estimate of goods credits rose $3,086m (6%) to $58,931m in the September quarter 2008.

Exports of rural goods, in seasonally adjusted terms at current prices, fell $399m (6%) to $6,659m, with volumes down 6% and prices up 1%. The largest decrease was in the cereal grains and cereal preparations component, down $437m (24%), with volumes down 23% and prices down 2% and partly offsetting this decrease was the meat and meat preparations component, up $66m (4%), with volumes down 4% and prices up 8%.

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $5,819m (14%) to $48,414m, with volumes down 2% and prices up 16%. The largest increases were in:

coal, coke and briquettes, up $4,301m (46%), with volumes up 2% and prices up 44%

metal ores and minerals, up $1,763m (14%), with volumes up 1% and prices up 12%

metals (excluding non-monetary gold), up $430m (12%), with volumes up 15% and prices down 2%.

Partly offsetting these increases was the other non-rural (including sugar and beverages) component, down $593m (19%).

Exports of other goods, in seasonally adjusted terms at current prices, rose $1,034m (29%) to $4,604m. The main contributor to this increase was the non-monetary gold component, up $986m (32%), with volumes up 30% and prices up 2%.

General Merchandise Credits(a)

Goods Debits

The trend estimate of goods debits rose $2,536m (5%) to $57,839m in the September quarter 2008.

Imports of other goods, in seasonally adjusted terms at current prices, rose $648m (23%) to $3,492m. The main components contributing to the rise were non-monetary gold, up $558m (27%), with volumes up 23% and prices up 3%, and goods procured in ports by carriers, up $80m (14%), with volumes up 5% and prices up 9%.

General Merchandise Debits(a)

Services

The trend estimate of net services at current prices was a surplus of $407m, an increase of $4m (1%) on the June quarter 2008 surplus of $403m.

In seasonally adjusted terms at current prices, net services recorded a surplus of $376m, a decrease of $69m (16%) on the June quarter 2008 surplus of $445m.

Services credits, in seasonally adjusted terms at current prices, rose $392m (3%) to $14,123m, with volumes up 2% and prices up 1%. The increases were in:

travel services, up $313m (4%), with volumes up 3% and prices up 1%

other services, up $123m (3%), with volumes up 3%.

Partly offsetting these increases was transportation services, down $43m (2%), with volumes down 4% and prices up 3%.

Services debits, in seasonally adjusted terms at current prices, rose $461m (3%) to $13,747m, with volumes down 1% and prices up 5%. All components contributed to the rise with:

transportation services, up $292m (7%), with volumes up 2% and prices up 5%

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits rose 10.2%. In original terms, it rose 10.4%. The chain Laspeyres price index for goods and services credits rose 10.2%. In original terms, the IPD for goods credits rose 12.8% and the IPD for services credits rose 1.3%.

The total goods and services debits IPD rose 4.4% in seasonally adjusted terms. In original terms, it rose by 4.1% and the chain Laspeyres price index for goods and services debits rose 5.0%. In original terms, the IPD for goods debits rose 4.0% and the IPD for services debits rose 4.9%.

IMPLICIT PRICE DEFLATOR(a)

Relationship to IPI and EPI

In original terms, the implicit price deflator for total goods credits rose 12.8% while the chain Laspeyres price index for goods exports rose 12.4%. The export price index (EPI) rose 13.8% during the September quarter 2008.

In original terms, the implicit price deflator for total goods debits rose 4.0% while the chain Laspeyres price index for goods imports rose 5.0%. The import price index (IPI) rose 5.0% during the September quarter 2008.

Terms of trade

Australia's seasonally adjusted terms of trade rose 5.6% to 121.0, with an increase of 10.2% in the IPD for goods and services credits and an increase of 4.4% in the goods and services debits IPD. The trend estimate of the terms of trade increased 1.7% to 121.0.

Income

The trend estimate of the net income deficit decreased $430m (4%) to $11,661m.

In seasonally adjusted terms the net income deficit decreased $1,610m (13%) to $11,072m. Income debits decreased $1,610m (7%) to $21,986m and income credits remained stable at $10,914m. The main components contributing to the decrease in income debits were:

$798m (9%) decrease in portfolio investment liabilities, income on debt

$408m (35%) decrease in direct investment in Australia, income on debt.

The stable income credits resulted from a $212m (4%) increase in direct investment abroad, income on equity, which was partially offset by:

$156m (5%) decrease in portfolio investment assets, income on debt

$37m (3%) decrease in portfolio investment assets, income on equity.

In original terms the net income deficit rose $591m (5%) to $12,256m. Income credits decreased $1,022m (9%) to $10,534m and income debits decreased $431m (2%) to $22,790m.

Net Income

Current Transfers

In seasonally adjusted terms, the net current transfers deficit was $96m, a decrease of $1m (1%) on the $97m deficit recorded in June quarter 2008. Current transfer credits fell $6m and current transfer debits fell $7m (1%) in the September quarter 2008.

CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $790m, up $244m (45%) on the June quarter 2008 surplus. Capital transfer credits rose $226m (27%) to $1,054m and capital transfer debits fell $18m (6%) to $264m.

Financial Account

The balance on financial account recorded a net inflow of $10.7b, with a $3.2b net inflow of equity and a $7.5b net inflow of debt.

The financial account surplus fell slightly in the September quarter 2008 in line with the fall in the current account deficit. There was a significant turnaround in net issuance of debt securities by Australian depository corporations from net issues of $9.7b in June quarter 2008 to net maturities of $23.6b in September quarter 2008. This was partially offset by an increase of $10.4b in long term loan liabilities and a $9.4b turnaround in currency and deposit liabilities.

Direct investment in Australia recorded an inflow of $14.5b in the September quarter 2008, an increase of $10.2b on the June quarter 2008 inflow of $4.3b. Australia's direct investment abroad recorded an outflow of $10.3b, a decrease of $3.6b on the previous quarter's outflow of $13.9b. In net terms, direct investment recorded an inflow of $4.2b in the September quarter 2008, a turnaround of $13.8b on the June quarter 2008 outflow of $9.6b.

Portfolio investment recorded a net outflow of $12.2b, a turnaround of $26.2b on the revised net inflow of $14.0b in the revised June quarter 2008. This was driven by a turnaround of $29.4b in portfolio investment debt securities liabilities on the June quarter 2008 to a net outflow of $18.4b.

Other investment recorded a net inflow of $19.9b, an increase of $15.2b on the net inflow of $4.7b in the previous quarter.

Reserve assets recorded a net inflow of $5.1b, a turnaround of $7.1b on the previous quarter's net outflow of $2.0b.

INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position at 30 September 2008 was a net foreign liability of $709.6b, up $12.1b (2%) on 30 June 2008. The increase consisted of:

net transactions of $10.7b

price change of $5.0b

exchange rate changes of -$3.7b.

During the September quarter 2008 Australia's net foreign equity liability decreased by $31.3b (38%) to $51.6b. A decrease due to exchange rate changes of -$57.3b was partially offset by increases due to price changes of $22.9b and transactions of $3.2b.

Australia's net foreign debt liability increased by $43.3b (7%) to $658.0b. Increases due to exchange rate changes of $53.6b and transactions of $7.5b were partially offset by a decrease due to price changes of -$18.0b.